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From time to time you hear the argument that Australia would be a much better place if only we could actively “decentralise” population. The argument is we should encourage people out of our big cities – notably Sydney and Melbourne – and into smaller cities, like Wollongong and Ballarat. In pursuit of this, various governments over the years have tried to move departments out to regional cities. The Victorian government under John Brumby even ran an advertising campaign in Melbourne encouraging people to move out and resettle in regional Victoria.

This sort of argument has often been based on the idea that these regional areas have lots of existing infrastructure that we can exploit at little cost. It has been encouraged by talk of the “Death of Distance” and “The Flat World” – the idea that globalisation and modern telecommunications are making location obsolete, so you might as well live in the countryside. It’s particularly popular wherever there are plenty of marginal regional electorates.

And this argument seem to be spreading. So here’s the case against spending government resources to actively encourage decentralisation.

The Overton Window is a quite well known expression describing the demarcation between political/policy discussion that is and is not acceptable in mainstream discussion. Sometimes what removes your idea from the window is that, whatever policy merit it might have, it would arouse the politically powerful and so ensure that it could only be implemented by democratic politicians with a death wish. This ‘rational’ interpretation of what’s in and outside the window is the one illustrated in most of the illustrations from which I took the one above. But a lot of the demarcation is much more arbitrary than that. It’s often just about what’s getting talked about. <MixedMetaphorAlert>So I have at least one policy horse in the race that’s outside the Overton Window for the classical reason that half a trillion dollars of market capitalisation of banking oligarchs would be seriously inconvenienced by it.</MixedMetaphorAlert> But other policy proposals of mine aren’t like that. They’re typically moderate, low or very low risk with high to very high potential payoffs.

So why aren’t they talked about? Well no reason really. They’re not talked about because they’re not talked about. Well they’re talked about by me. And when I give a presentation on them, people often respond as if they’re positively elevated to hear them. They complement me on how ‘lateral’ they are. Just hearing such ‘out of the box’ thinking makes them feel more innovative. They sometimes say I really should come and give a talk to their whole management group or some subset of it. They sometimes, though much more rarely, make that happen. And then they get back to their in-tray.

When I was working for the Business Council of Australia I once tried to sell independent fiscal policy to Australian Democrat Treasury spokesperson Andrew Murray. After my presentation he was very complimentary and asked if I couldn’t perhaps get anyone really important to publicly endorse the idea. It’s a reasonable question from him, as a person with limited expertise and resources at his command he needed to protect himself against crank proposals or proposals that earned him the ire of the powerful. I suggested he ask Ross Garnaut what he thought of the idea, but in the end Senator Murray just got back to his in-tray. And somehow most of the gatekeepers to the Overton Window don’t see it as their role to widen it in helpful ways.

They all get greater kudos for entertaining more mainstream thoughts, like “how soon should we balance the budget?”, “do we need more workplace flexibility?” or “will the RBA cut cash rates at it’s next meeting?” or that perennial “what’s the outlook for the Hawks next week the economy and how does [insert important person/institution] think it will go?”. Another fave is “how can we get back to the glory days of productivity growth?” (so long as it’s a well understood answer – like “more micro-economic reform” – which will be just like what we already know from the glory days of reform).

Those ‘out of the box’ the ideas I’ve sketched out often arise from a little reframing of an issue. So they’re not answers to well known questions – which very often come in the form of “should we spend more or less money on” or “should we tax this or that activity more?” complete with a quick cross to the interest groups who can be relied upon to slip into the trenches lobbing soundbites back and forth across the terrain of interests and ideologies. Continue reading →

I drove for the best part of 11 hours over the last few days giving a Do Lecture (would you believe?) which was fun. In any event I listened to some seriously great radio.

Inside the drug court I was riveted by three 50 minute docos on the NSW Drug Court. It really is a tragedy that our media overlords have decided that this innovation is ‘soft’ on crime compared with the traditional system. I think it’s much better understood as simply breaking down the interface between prison and out of prison in a more thoughtful way than the traditional system does.

The traditional system exercises various sentencing and post-sentencing discretions. All the NSW Drug Court does is design a system of discretion and resources so that the incentives in the prison system actually work in the short term – where we know from research (and commonsense) that stimulus-response mechanisms work much more effectively.

The NSW Drug Court operates by suspending the sentences of prisoners and bringing them into a regime where their progress and their liberty is reassessed every week in a court hearing before a judge. This is combined with some counselling resources and drug tests three times weekly. They must attend all appointments on time, and they must self-declare all breaches of their conditions in their weekly court hearing. When they acquire 14 ‘sanctions’ or recorded failures to meet these conditions (and with their chaotic lives they often they acquire several in a single week) they are sent back to prison detox unit for 14 days and so the process goes on until they either graduate to stages two and three which involve progressively less intense supervision after which they graduate altogether. The alternative throughout is that they simply lose their place in the program and complete their prison sentence.

As you can see, it’s hardly ‘soft’. Just a sensible adaptation of the prison system and its resources to the challenge which the radio programs show you is an immense one, of rebuilding the life of a person who’s leant on drugs to get them through their life for often at least one, and frequently two or more decades, while their life has fallen further and further apart, while what semblance there was of order in their lives has been thoroughly white-anted, whose whole identity and social network is built on their life on drugs and outside the law. So it’s pretty much out of the fire of prison and into the frying pan of a Skinner box of active operant conditioning.

It still struck me how legally based the program still was. I have no problem with the legal architecture. A court hearing once a week might make a lot of sense, but it seemed to me the program, as good as it seemed to be was still crying out for more peer support mechanisms such as those we build in TACSI, in addition to – and probably in replacement of some of - the professional support. The three programs were made over 14 months and take you inside the process and into the lives of four or five people who go through the process. If you don’t have three hours, take just one and listen to one of the programs. (This is an order from Troppo Headquarters - your internet address has been logged). I found them gripping. You’ll love and despair at some of the characters. The programs, in order are here, here and here.

The vagabond Fascinating story of an eccentric Melbourne man who set himself up as The Vagabond, (presumably) Australia’s first ‘embedded’ journalist reporting from the front-line of various institutions of Melbourne that would have been, without him, out of sight out of mind. Here’s the link.

Peter Sculthorpe I’m not much of a fan of modern ‘serious’ music and so have not listened to Peter Sculthorpe. Indeed, after listening to him being interviewed and loving doing so, I’m curious to listen to some of his music which I will, though I don’t have any strong expectation that I’ll even like it. But the moment you hear his voice you can hear that he’s a certain kind of older person. Centred, thoughtful, humble, insightful about his life and the world around him. I love listening to such people. His music wafts beautifully mostly in the background. Here’s the link.

Note: All these programs other than the last are on a new program called Earshot which seems to simply scoop up all sorts of docos on just the kinds of subjects that interest me. It also seems to have absorbed the ABC’s religious program Encounter, which I’ve always liked, though some of the programs I listened to on my drive were pretty disappointing. One on Volunteer Tourism took an awfully long time to get to the point of what was wrong with it beyond vague generalities and the second program in three on Faith, reason and the three Abrahamic religions – on Islam which let radical Islamic spokespeople off way too lightly IMO. They all claimed to be non-violent and I presume they were, but the scene was set with references to Australian Muslims demonstrating with signs calling for the death of those who ridicule the prophet. The Muslims in the program were not even asked to say what our attitude or policy should be to such conduct or required to confront it as a problem.

The episode on Christianity interviewed some very interesting people – like poet Christian Wyman. It offered a reasonable alternative view to schoolboy atheism, but having set up the dichotomy between atheism and belief drifted into a comfortable “we’re among Christians here” mood offering the alternative view without going to the trouble of offering anything that would have any chance of at least slightly unsettling the schoolboy atheists they’d framed the program around (many of whom are readers of this site).

Oh well I guess snark can be justified as necessary to keeping standards above some rock bottom. Anyway, I did wonder whether this article on the Renaissance and innovation was the silliest thing written on either. Even ignoring the fact that he is about half a millennium out in equating the mediaeval period with the ‘dark ages’ there’s a deeper deliciousness to the way in which he imagines that, by describing a period he has explained it. “It wasn’t just a change of culture that made Western Europe so conducive to innovation at that time. It was also a change of mindset”. Innovation thrived in the Renaissance because of its more innovative culture – not only that but it’s more innovative mindset. The sedative worked because of its dormative qualities.

Monday’s column in the Fin published as “Debate should be on best-use, not ownership of public data”

Data is in the news but we’re still working out how to think about it. Ladies and Gentlemen, we’ve got the Wrong Metaphor. Let me explain.

There’s endless argy-bargy about who ‘owns’ firms’ customer data – them or their customers? And the government wants access to stored ‘metadata’ on our internet activities – what sites we’ve been to, who we’ve communicated with. Then there’s all that data governments collect through the five yearly census – next due in 2016 – which the government recently wondered aloud whether to scrap. (Should it really cost the best part of half a billion when most citizens could be surveyed online?)

As governments gear up their surveillance armoury and we disgorge terabytes of data to Facebook and Google, we’re jealous of our privacy – as well we might be. In our commercialised age, this becomes a debate about who should ‘own’ data. Yet notions of property arose to help us think about and control physical things – like personal possessions and land. Subtle traps await those using the metaphor of property to deal with incorporeal things like ideas and data. Continue reading →

STEM is all the rage in education – that’s Science, Technology, Engineering and Maths. Part culture war against Australian mediocrity, part cargo cult, a principal goal is more money – for universities and school education. It’s hard not to agree. Lateral Economics’ HALE index of wellbeing values Australian human capital at $18 trillion – over three times all other physical and natural capital combined. Growing it puts every other means of enriching our future in the shade.

Still, I smell a rat.

We’ve nearly doubled educational spending per student in the last few decades. That’s funded popular measures with little impact – smaller class sizes – and politico/educational fads some of which have proven disastrous – like whole language learning. If STEM is simply cranked up and bolted onto the existing system, expect business-as-usual, expensive-as-usual disappointment.

Traditional STEM teaching often turns kids off. If they were ever invited into the debate, they’d see the STEM agenda as baby-boomer finger wagging telling them to eat their greens. They’d ask what exciting jobs will exist for STEM graduates. They’d ask what STEM skills will be in demand in ten or twenty years. And we don’t know.

The vast riches of Silicon Valley use STEM skills sure enough. However not only has old-fashioned entrepreneurialism been the dominant input, but the main STEM contribution has been computer coding. While that’s taught in universities, the valley is full of practitioners who’ve mostly taught themselves with the help of free internet resources and their own workplaces. Silicon Valley has embraced data science but no thanks to university courses. Even today, while they crank out stats grads, our universities barely teach data science.

The innovation we desperately need to get STEM right is institutional. In 2010 I proposed a different approach lunching with the secretary of a state Education Department followed by discussions with his senior managers. I suggested we tap into free resources all around. The net is brimming with free resources. Want to learn how to build a website or learn JavaScript? Head to CodeAcademy.com.

Second, while teacher training, support and specialisation in STEM should be better resourced, on its own that would achieve very little. The last thing we should do is insist on widespread STEM in-service training for existing teachers – for instance in teaching computer skills – who’d simply go through the motions.

Meanwhile an immediate human resource is students. We should find those already doing it for themselves and empower them to enthuse and teach their peers – not to mention reverse mentoring their teachers. And if we’re to do that, we must make room for it in kids’ timetables and in the recognition they receive – their marks.

However that requires some real transformation of existing routines and priorities. And incumbent organisations find that almost impossible. Much better to seek funding for some new, bolt-on initiative. As we’ve loaded the curriculum with recent enthusiasms and political correctness, what priorities have we jettisoned? Stats was more useful than trigonometry even when I was a kid: Much more so now. But the relative weightings in the maths curriculum haven’t changed in 30 years. I learned more about computer coding in school in the the early 1970s than my kids have done in today’s schools.

What I’m proposing can’t simply be ‘rolled out’. Just as a manufacturer wouldn’t release a new product without extensive design, prototyping and testing, that’s what should happen here. We should draw out in-system entrepreneurs, fund experiments and pilots, fixing or jettisoning the failures, identifying, tweaking and growing successes and rewarding those behind them.

After speaking with the Education Department, I attended a showcase of students’ achievements in IT projects. There I met Ben, a year 8 student. He’d built an iPhone app to hone his brother’s mental arithmetic.

“How do you find maths” I asked.

“Boring! We keep doing the same stuff.

“How’d you like to teach other students to write iPhone apps?

“Awesome!

“Wait right there.

I fetched the Departmental Secretary. Here was an opportunity to get going with what I’d proposed. Excited, he summoned his Innovation Chief saying “I want to start on this tomorrow!”

The next year I asked Ben how things had gone. I still have his reply: ”Nothing really went anywhere with my school, didn’t really surprise me”.

The STEM agenda could handsomely enrich our future, but only if it’s part of wider transformation which, though it would cost nothing, offers a richer prize than any amount of new STEM funding.

Postscript: the interview of the blogpost of the column on this page with the mp3 here.

As readers will know, I’ve been a fan of the way in which the internet generates reputational information which greatly improves the efficiency of markets. Still it’s surprising how tricky these things are, something I’ve been pondering while using Airbnb for quite a few stays in Europe. There are several major problems with Airbnb’s rating system, which are enough to have me much less keen to use it.

Firstly it seems that there’s a happy clappy vibe in collaborative consumption. Perhaps once people have met others they don’t want to reflect on them invidiously. Perhaps they are hyping the vibe of collaborative consumption and how luvvie duvvie it can be. Or perhaps they’re thinking of the incentives. I don’t like leaving bad reviews because when I’m seeking to rent a place, hosts can look up my previous reviews, and if they’re lower than others, they mightn’t want me to so review their place. Perhaps this drives grade inflation on the system.

And perhaps to prevent that, Airbnb do separate out streams of feedback including feedback for all, private feedback for the host and private feedback to Airbnb.

But there’s another problem. Airbnb’s survey is the kind of survey that irritates me when I get one from a hotel. It asks for five stars in various categories which make logical sense.

Accuracy, Communication, Cleanliness, Location, Check In, Value. The thing is, it remains quite possible to have a flat that is more or less uninhabitable whilst retaining a four and a half star rating. How do I know? Because I’v been staying in such a place in Barcelona. It gets four or more stars in all categories and a four and a half star rating overall. About half of the reviews are very positive. So on a quick squiz we booked. Four and a half stars overall? What could go wrong? Here’s a not untypical review from the remaining reviews.

Jordi met us, and gave us a lot of great information about the neighborhood and the city. The location and price are excellent.

However… I must mention that this is the noisiest place I have ever stayed. The apartment is upstairs from Bar Mariatchi, which is open until at least 3am EVERY DAY, and which has loud music that you will hear through the walls, making sleep nearly impossible, even with earplugs. Plus, you can count on street noise–talking and yelling–until the wee hours EVERY DAY. The noise factor derailed our rest, pushed our sleeping to the “quiet” times (7am-noon), and thus rather derailed our daily sightseeing plans.

If it weren’t for this excessive noise factor, I would recommend this apartment wholeheartedly. As it is, I can only recommend it to those who plan to party into the wee hours every night and sleep the days away.

Note how people are at pains to be nice, even if their time has been effectively ruined. Yet the place keeps getting it’s four and a half plus ratings. Enough to swing my preferences back towards hotels I’m afraid.

Standard economics’ traditional penchant for focusing on problems that are chosen for their formal tractability rather than their resemblance to real world problems squeezed non-monetary incentives and ‘irrational’ motives from economists’ purview. At the same time bureaucracies are very good at doing the same thing – of ignoring the specific nature of the life world of those they serve. (Of course ‘cultural incentives’ and if you like ‘irrational’ motives are at the heart of what makes bureaucracies work at all, but that’s internally. Those very conditions create fertile ground in which the organisation will make presumptions on the rationality of those whom they serve. But I digress.)

There are two potential ‘narratives’ as we say these days about behavioural economics as an antidote to this state of affairs. The first – exemplified, for instance in this blog post from behavioural economics consultancy 42 ideas - is that behavioural economics and the policies that emerge from it provide an example of economics’ taking upon itself the injunction “Physician health thyself”. Thus in the place of homo economicus - a simplified but unrealistic view of human nature – behavioural economics investigates the way this model is wrong and policy inspired by it takes those things into account in proposing new policy.

Thus the nudge unit in the UK (we have a small clone of it in NSW) does AB testing on government correspondence – discovering and exploiting the fact that taxpayers show stronger compliance to an arrears letter from the tax authorities if it contains a sentence like “over 90% of taxpayers pay their taxes on time” and the response is a bit higher still if the sentence makes the comparison more personal still “Over 90.5% of your neighbours in Notting Hill pay their tax on time”. These are ‘nudges’ in the vernacular of this field and so too is attention to trying to set the most benign possible defaults to take into account the power of inertia. The classic example – used around the world in both government and business these days is setting people’s savings plans to save higher proportions of their income (often by diverting any pay rise they have received into savings) unless they make a conscious decision not to go along, in which case it’s as easy as ticking a box on a form and they can (consciously) choose some alternative. This is behavioural economics as a box of tips and tricks to be added on to neoclassical economics. The physician, if he hasn’t healed himself, has introduced some routines that are better suited to the world.

But there’s another way to look at these tips and tricks – to look at them as ‘tips and tricks of the iceberg’. Ultimately people must be encountered as such. The tips and tricks of behavioural economics are no more or less than a summary of rules that have been gleaned that have the generality necessary to find their way relatively straightforwardly into the learned journal literature. But there’s a whole life world out there. That’s what needs to be encountered and that’s what is always in danger of being given insufficient weight. As Hayek put it

Today it is almost heresy to suggest that scientific knowledge is not the sum of all knowledge. But a little reflection will show that there is . . . a body of very important but unorganized knowledge: . . . the knowledge of the particular circumstances of time and place. [In this] respect . . . practically every individual has some advantage over all others because he possesses unique information of which beneficial use might be made, but of which use can be made only if the decisions depending on it are left to him or are made with his active coöperation.

Hayek only ever paid any attention to one particularisation of this general proposition – he’s thinking of the value the trader adds in a market to the knowhow of the scientist, the accountant, the engineer, the boss. But the observation is a much wider one. Yet the very tyranny of central planning against which he set himself is alive and well inside organisations, not least government organisations and those that deliver their services.